10/31/2011 Market Outlook (Rebound maybe, but more selling ahead)


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SHORT-TERM: MAY SEE REBOUND BUT CHANCES ARE MORE SELLING AHEAD

Three cents:

  1. More selling ahead, although short-term rebound first might be. When I say more selling ahead, I don’t mean merely a lower low tomorrow, I mean the selling could last for awhile.
  2. Could see lower low in the morning then reverse to close in green tomorrow AGAIN (pay attention to this “again”). I’m a little skeptical about such a pattern though as it’s been repeated 3 times recently. Cannot believe that we’ll see it again the 4th time.
  3. If another huge down tomorrow, then bulls better be careful, because it’d double confirm the conclusion I made today that more selling ahead. We’ll discuss this if indeed huge down tomorrow.

So accordingly here is the evil plan.

EvilPlan

Now allow me to present all the evidences backing the above evil plan.

Why will we have a lower low first? Because today is a Major Distribution Day, so simply because of the inertia, more likely we’ll have a lower low tomorrow.

LLGuaranteed

Why will we see a rebound to close in green?

  1. The revisit of the previous high is perhaps the most commonly seen pattern before a possible reversal because you Earth people always like to try twice before giving up and trying the opposite. As annotated in the evil plan chart above, because Push B > Push A, so there’s no sign that the up momentum was weakened, therefore chances are, at least there’d be a weaker Push C. Not necessarily a new high but most likely there’ll be a Push C.
  2. VIX rose 22%+, which means 78% chances a green day tomorrow.

VIX

The chart below is just to show why I said that the same “lower low in the morning then reverse to close in green” pattern has repeated 3 times already. I’m really skeptical about the 4th time. That said, everything I say here must be based on evidences and since the evidences seems strong enough to support that “lower low then close in green” pattern, so no argue here, just a little murmuring about my skeptics.

SPYDaily

The last but not the least, why do I expect more selling ahead? Because it’s 2 Major Distribution Day within 5 days (Surprised? Yeah, I actually changed to a bearish tone from a neutral tone today after I saw this), so short-term rebound 67% chances but with or without the rebound, 89% chances more selling ahead.

2MDDin5Days

INTERMEDIATE-TERM: WE COULD SEE MULTIPLE WEEKS RALLY, WILL NEED REASSESS SPX 1,000 DOWNSIDE TARGET

For why we could see multiple weeks rally, please see 10/14 Market Outlook for details.

For why SPX downside target at 1,000, please see 08/19 Market Outlook and 09/30 Market Outlook for details. I’m not sure about this call anymore, will need more evidences to reassess.

SUMMARY OF SIGNALS:
TREND MOMENTUM COMMENT
Long-term 2 of 3 SELL
Intermediate 5 of 5 BUY 4 of 5 NEUTRAL Cobra Impulse in BUY mode; Non-Stop in BUY mode.
Short-term *DOWN? 3 of 6 *NEUTRAL
* = New update.

 

 

Chinese Transcript

SHORT-TERM: MAY SEE REBOUND BUT CHANCES ARE MORE SELLING AHEAD

三点说明:

  1. 多半还有的跌,虽然短期可能有反弹。这个不是仅仅明天lower low的问题了,是持续一段时间的下跌。
  2. 可能明天又是(注意这个又是)早盘lower low然后盘中反转收绿。不过,我有点不敢相信,因为同样的pattern,已经重复3次了,第4次还这样吗?
  3. 明天如果又是暴跌,牛牛要小心了,因为是对今天的“多半还有的跌”的结论的进一步确认。这个,如果明天真的暴跌的话,再谈吧。

下面是evil plan。

EvilPlan

下面解释一下怎么得出以上的evil plan的。

先有lower low,是因为今天是Major Distribution Day,根据惯性,大多数情况,明天都会有lower low。

LLGuaranteed

为什么会反弹且收绿?

  1. 回测前高是非常非常常见的pattern,你们地球人做什么都喜欢测试两次,然后才可能反转。上面的evil plan里已经说了,Push B > Push A,上升动力没有减弱的迹象,因此至少还会有个比较弱的Push C。
  2. VIX涨了22%+,明天有78%的机会收绿。

VIX

下面的图仅仅是想让大家看一下,为什么我说同样的早盘lower low然后盘中反转收绿的pattern,已经重复了3次了。我确实很怀疑第4次是否还是这样。当然,证据说话,至少目前看,明天lower low然后green的可能是很大的。

SPYDaily

最后解释一下为什么说还有的跌?因为2 Major Distribution Day within 5 days,67%的机会短期反弹,但是不管有反弹于否,89%的机会此后还有的跌。

2MDDin5Days

INTERMEDIATE-TERM: WE COULD SEE MULTIPLE WEEKS RALLY, WILL NEED REASSESS SPX 1,000 DOWNSIDE TARGET

For why we could see multiple weeks rally, please see 10/14 Market Outlook for details.

For why SPX downside target at 1,000, please see 08/19 Market Outlook and 09/30 Market Outlook for details. I’m not sure about this call anymore, will need more evidences to reassess.

SUMMARY OF SIGNALS:
TREND MOMENTUM COMMENT
Long-term 2 of 3 SELL
Intermediate 5 of 5 BUY 4 of 5 NEUTRAL Cobra Impulse in BUY mode; Non-Stop in BUY mode.
Short-term *DOWN? 3 of 6 *NEUTRAL
* = New update.
  • RK

    FOMC on Wednesday so cld be a small candle tomorrow with a lower low…perfectly fits previous 2 cases…it might not be that easy as it looks

    • graciela c

      what you mean ? small candle? that would reverse after that to an uptrend ? thanks RK

      • RK

        chk previous 3 cases…cobra highlighted…i am saying it wld be more of last two…

        That is just my thought…

    • http://www.cobrasmarketview.com/ Cobra

      hmm, good observation. I think this time should be worse than small candle, so how about lower low, then rebound deep into today’s bar but eventually close in red? I mean should be weaker than the previous 2 bars. The bar weaker than Doji, can only be a red bar.

  • Anonymous

    Thanks Cobra!

  • http://www.blog.donnaklinenow.com dkpa

    Thank you Cobra, for your copiously insightful blog. Much appreciated!

  • Anonymous

    thx, ding

  • http://pulse.yahoo.com/_ZE7QYSVEAVCP7G5YS77S32YBLU don bonzo

    About evil plan – If it really makes a lower low first then the trend line joining 3, 4, 5 will be broken, hence I expect it rise to test the trendline around 127 only. 

    • http://www.cobrasmarketview.com/ Cobra

      Could be. The last push up, higher high is not the must.

  • Anonymous

    nice looking evening star candlestick formation on the spx.  need a down day to confirm or a small candle with a down day the next day to confirm the trend change. I’ll give myself a ‘Like’ for my all-star market analysis!

  • Anonymous

    Looks like your almost guaranteed higher high is dead in the water 

    No guarantees in the stock market..now we know..

    • Anonymous

      We know you can’t read correctly, his chart says immediate lower low almost guaranteed.

      • Anonymous

        Lol smart ass, the higher high call from last week. Facepalm.

        • dham pusha

          well, he’s also rethinking abt his spy @ 1000 call, which was there for last 4 months. but you don’t need to blame him 4 that.. he calls himself cobra for the reason – that he can easily switch the bull-bear sides.. thr’s so much 2 learn @ TA from cobra, nd he does all hard work 4 free.. so learn 2 appreciate.. take the predictions with pinches of salt..

          • http://www.cobrasmarketview.com/ Cobra

            Thanks. I think unique_afb does not mean to blame me. Even is, at least I don’t read that way. I did say higher high guaranteed last week, all I said here are odds. if everything is 100% correct, I’d be very rich now, who cares about blogging here. The fact I’m still working hard here simply is because I cannot be 100% right. So I’m OK with what he said. Thanks again.

    • http://www.cobrasmarketview.com/ Cobra

      Yeah, you’re right, nothing is guaranteed, that’s why I have “almost” word. :-)

  • Anonymous

    thanks Cobra.

    Your comment on RK’s post is important.

  • uempel

    It’s Tuesday 2 am and the futures are hovering at 1237. I’m less bearish than most guys here because momentum has not given a sell signal yet (see my previous post). My line in the sand is a close beneath 1220, and the signal to go heavily short is a close beneath 1200 (P&F support).

    Something else: we all know the story about the butterfly which in due course makes the world collapse, right? I wonder what the real implications of MF Global’s bankruptcy will be. Pundits and media are appeasing, saying the implications are minor. But who knows, maybe MF is a Wallstreet butterfly. Not necessarily because of the financial damage, but because a senior Wallstreet figurehead was caught playing roulette. The loss of confidence could be huge.  

    • Anonymous

      futures: 1226 at 4:30 am ET

  • Anonymous

    it’s 7am and the futures are down over 2%.  1220 could be in the cards.

  • Anonymous

    It is apparent that futures trend is down. So, I would bet some money on the short side as on the long side risk/reward is not much and stay on sideline too long may be mis-opportunity as trend unfolds. So do what you think fits your goal. For me I am bearish and I call for today close below 1224.

    • Michel G

      1224? 1220? we are going straight 1200… even 1190 and then will fight and see who wins…

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